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The Numbers Behind Drop Shipping

We
have previously blogged about the pros
and cons of drop shipping,
but what else do you know about this hot topic? We thought we'd
provide a more detailed post detailing the numbers behind drop
shipping, some of the most common questions, and whether it's a good
tool for your business...

The
Ecommerce market

Fact
1:
Retail e-commerce is a $220 billion dollar market in the U.S. alone
and is growing by nearly 17% a year. (eCommerce
Drop Shipping Standards)

This
number only looks set to rise with U.S. Online Retail Sales expected
to Hit $370 Billion by 2017! There's no denying that the ecommerce
market is huge.
With awesome
tools
readily available to now help people set up their online store, it
makes sense that people are looking for ways to improve on their
store.

Enter,
drop shipping...

What
is it?

For
those who didn't catch the previous post, drop shipping basically
means that when a customer places an order from you, the supplier
will ship the product directly to the customer – so you don't have
to.

This
means that you don't have to worry about finding a warehouse for your
stock, spending hours of your time dedicated to shipping products and
you are free to run your store anywhere you like.

Who
else uses it?

Fact
2:
22-33% of Internet retailers have adopted drop shipping as their
primary method of order fulfillment. (E-DSS.org)

You'd
be surprised how many stores actually use this method to help shift
their stock. Zappos
began as a drop shipping company, Amazon and Sears both use drop
shipping and Wayfair.com
has built their entire business around this very method!

Fact
3:
In 2012 drop shipping accounted for 34% of products sold in 2011 by
e-commerce giant, Amazon.com. (Forester
Research)

That’s
$14.2 billion dollars of drop shipped orders from a single
e-retailer! Now if Amazon can make it work for them, then there's
definitely the opportunity for your online store to do the same.

Can
I profit from drop shipping?

Yes
you can. If used correctly, drop shipping can be a great help to the
success of your business. As you will be cutting shipping costs
completely, there is potential to make a profit here.

You
will save money because:

You
won't have your money tied up in stock

You
won't have to pay for storage and associated bills of storing
inventory

You
won't need to pay for a warehouse, equipment or staff

You
won't need to buy in bulk – so you won't have unwanted stock to
shift

How
do I find a supplier I can trust?

When
it comes to drop shipping it's OK to be cautious, but as with any
business tool, you need to do plenty of research. If you pride
yourself on excellent customer service, then your supplier has to be
somebody who you can trust and shares your values. If they are
willing to offer seamless communication with you then there's no
reason why you can't form a great partnership. Check out
WorldWideBrands
as you can find a whole directory of wholesalers, along with
testimonials.

How
does it benefit the manufacturer?

Fact
5: The
average profit of a manufacturer who drop ships is 18.33% higher than
a manufacturer who uses traditional channels. (The
Journal of the Operational Research Society)

Due to storage
limitations, when a retailer has to buy in bulk they can normally
only hold around 13% of what a supplier would like to sell –
meaning lower profits for the supplier. With drop shipping, the
constraints are lifted so the retailer can buy whenever they get an
order, and the supplier can make more money in the long run.

Do
I have to use drop shipping all year round?

Fact
6:
In the 2013 festive period, 18 percent of retailers increased their
inventory with the help of drop shipping, due to an increase in
sales. (E-DSS.org)

The truth is, you don't
always have to use drop shipping if you don't want to. Anyone with
good business sense will know that you can't become too complacent.
If something isn't working then change it. If an opportunity comes
along – take it. Drop shipping might not always be something that
will work for your online store all the time, but during busy festive
periods – it certainly can help you sell more stock.

It's
in your hands

The choice is yours to
decide, but if you are new to ecommerce then drop shipping is a
convenient and easy way for you to get started with your online store
success. Are you considering it? Do you use it currently? We'd love
to hear what you think in the comments below!

And
speaking of ecommerce success – don't forget to give
us a call
if you ever need help setting up your awesome online store.

@Keri Blakinger, thanks for commenting. True - there are many people that aren't familiar with drop shipping as an order fulfillment option. It is really a great way to start a business on a shoestring budget.

In the past I didn't know what drop shipping entailed either, but I soon learned and it was the proper way for me to get sales out. I did a lot of research, I mean a lot. I didn't want to pick one that would do good, I wanted one that would be perfection. Drop shipping is I believe, the future and will continue to grow.

Without drop shipping I would not have been able to do what I have done on the Internet. It is outsourcing the logistics of your business and you become the sales department. To me it is a win/win situation as long as you make sure you have a good drop shipper and that you have a good eCommerce system like the ones offered here. I have been around marketing on Internet since before Google got started and drop shipping has always been a part of it. It has now become a mainstay in eCommerce. It is a great business model where you find a good site to host your store and let someone else ship your products. What more can you ask for.

@Bo Tipton. Nice comment. Sounds like you and I have a lot in common. Except when I started in eCommerce and drop shipping in 2003, Google was very much up and running. But, even back then, Google and Yahoo shared search results. So a lot has happened since. Drop shipping hasn't changed much. But more suppliers have embraced it as a part of their wholesale strategy. That continues to open doors as eCommerce sales are at a steady upward pace.

@Bryan I remember that drop shipping was around before the Internet took off. Before using companies like Maxim and small classified ads you could use drop shipping to sell items. If drop shipping is selling other peoples products without buying them then champion of that business model is Walmart who makes millions each month selling products they did not have to pay for. Most of their products are placed there on consignment. Look what it has done for them. I know I would be happy to have products in Walmart on consignment.

Thank you for addressing profit from drop shipping. It's true that you will have lower margins on drop shipping, but it allows you to focus on just selling the product. You don't have any of the costs you mentioned, or the added cost of hiring employees to manage and ship inventory.
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